More Articles | Free Reports | Premium Services February is ending with a thud… After yesterday’s closing bell, AI chipmaker Nvidia reported blowout fourth-quarter earnings. Sales were up 78% from a year ago, beating Wall Street estimates. And its guidance for the first quarter was strong. Translation: The company can’t make chips fast enough to satisfy AI demand. And yet… Its shares fell in after hours trading. Nvidia stock is near its June 2024 level. And the darling chipmaker isn’t the only highflyer struggling to get its mojo back. -
Tesla is down over 40% from its December highs -
Apple is back to last June’s level. -
Microsoft has been treading water for about 13 months -
AppLovin, the AI ad firm that’s been the toast of Wall Street, is down 35% in the past two weeks -
Palantir is down by about 25% over the same time What about Bitcoin? It’s been a model of stability relative to high-flying tech stocks. But it’s still down about 20% from its high. And over the past couple of weeks, crypto investors have seen about $800 billion in market value go up in smoke. That’s roughly the combined market value of Johnson & Johnson and Visa – two of the world’s iconic blue chip stocks. What’s going on? Is the Trump trade dead? Is tech dead? Today, we’ll look at what’s behind Nvidia’s post-earnings flop. We’ll also cast a cold eye over the trouble in the crypto market... And the golden thread that ties these two events together. Finally, I’ll introduce you to something called Project MQ. It’s a new data-driven way to assess what’s going on with the bull market in tech… and where Nvidia shares are headed in 2025. Let’s dive in… | Recommended Link | | | | In the middle of this week’s volatility, an ultra-rare pattern has emerged in the markets that has only appeared three times going back 125 years. Last time this pattern appeared, backtests show it triggered certain tech stocks to soar thousands of percent over time... while devastating millions of Americans who failed to prepare. If you’re looking for answers on where the market’s really headed next, don't miss our urgent briefing tonight, at 8pm ET. Click here to automatically secure your spot. |  | | Multiples So High They Look Like Typos Nvidia is a great company… It’s the ultimate embodiment of American capitalism. If its story ended today, it would already be one of the greatest technology success stories in history. And it likely has years if not decades of strong growth in front of it. But as we looked at on Tuesday, great businesses aren’t necessarily great stocks. No matter how fantastic a company is, there’s a price at which buying its stock simply doesn’t make sense. As legendary distressed debt investor Howard Marks puts it, “Any asset that seems attractive at a low price should also seem like a bad deal when the price is way too high.” Well, today Nvidia is a $3.1 trillion company trading for 27 times sales and 49 times earnings – multiples that are so high they look like typos. Think about it. Those numbers mean that investors are willing to pay $27 for every $1 of the company’s revenue and $49 for every $1 of profit. Besides, who’s left to buy Nvidia at this point? Virtually every ETF, mutual fund, hedge fund, public pension, endowment fund, and your old fraternity brother’s mom already own it. And it’s probably one of their largest holdings. StockTwits is the microblogging site known as “Twitter for investors.” It reports that about eight out of 10 of its users own the stock. What would Nvidia have to do to get the last three people in America that don’t already own its shares to buy at the point? High prices alone don’t cause a stock to fall. But when everyone who could buy has already bought, watch out. Okay. Now what about Bitcoin? Wasn’t Trump Supposed to Be Good for Crypto? Certain pockets of the investment world exploded higher following Trump’s election win – particularly AI stocks and cryptocurrency. Some of this was down to the belief in what he’d do (specific spending priorities). Some of it was the belief in what he wouldn’t do (regulate!). Bitcoin shot up by about 50% following the election. Some of the giddiness was because President Biden’s chief financial regulator, the crypto-hostile Gary Gensler, would be out of the way. This, investors reasoned, meant the government would stop persecuting the crypto industry. That has, thus far, held true. Team Trump has had a much lighter touch regarding crypto regulation than Team Biden. But crypto investors also expected Trump to follow through on his campaign promise to make Bitcoin a government reserve asset, much like its gold reserves. This would see the government buy up to a million bitcoins… and send its price to the moon. Well, there hasn’t been any movement on that front. Though Trump did find time to launch his own meme coin, $TRUMP. (It’s down about 80% from its January high.) Here at The Freeport Society, we were bullish on Bitcoin long before it became a political trade. I added it to the model portfolio at our flagship Freeport Investor advisory when we launched in December 2023. Despite its recent fall, we’re holding open gains of 106%. And it remains a long-term holding. I believe that Bitcoin will ultimately go a lot higher due to its role as a dollar hedge. But the lack of Treasury movement to set up that Bitcoin reserve has taken the wind out of the sails in the short term. Then there’s Elon Musk’s cost-cutting outfit, the Department of Government Efficiency (DOGE). It’s become a headline whore. But is it really making a dent in government spending as advertised? | Recommended Link | | | | While everyday investors keep piling into names like Nvidia, Apple, and Amazon... the owners of those very companies — Jensen Huang, Tim Cook, and Jeff Bezos — are dumping their OWN shares at a record pace. This is exactly what we saw 25 years ago… right before the dot-com crash wiped out millions of American’s portfolios. Now, “America’s top trader” is warning that big tech could be barreling right toward another dot-com style implosion. Click here for the critical details. |  | | More Chaos in the System I will never say no to government spending cuts. At The Freeport Society, we believe in free enterprise with all the ups and downs that come with it. Big Government is fundamentally incompatible with free enterprise and with the freedom to live your life the way you want it to. So, yes! Please take that chainsaw and go to work. Dismember the entire thing. But firing government workers doesn’t dissolve regulatory red tape. You and I still have to file tax returns even if there are fewer IRS agents to answer the phone when we have questions. And cutting too many workers makes regulatory reform harder because you have fewer people to do the work needed. DOGE, for all its firings, office closures, and general pandemonium, hasn’t made the government smaller. Bloomberg estimates total savings of about $8 billion. That’s a lot of money if it was in your or my bank account. But it’s just 0.12% of the government’s spending last year. And even if we give Musk the benefit of the doubt, and accept he’s saved the $65 billion he claims he has, that’s still less than 1% of the budget. But while Musk has made no appreciable difference to the budget, he’s injected a massive amount of chaos into the system. If you’re running a company, you’re probably going to hold off on hiring or making any major new investments until the dust has settled. The same is true of Trump’s proposed tariffs – aka “taxes on shoppers.” (U.S. companies importing goods are the ones who pay the tariffs. These companies pass those extra costs onto consumers to protect their margins.) Trump’s proposed 25% tariffs on Canada and Mexico may or may not be going into effect on April 2. There’s also uncertainty over Trump’s promise of 25% tariffs on imports from the European Union. For a guy who ran on a pro-business platform, President Trump’s America isn’t a particularly easy place to do business right now. All of these points explain the markets’ mood this week. The question is… What Happens Next? Don’t bet on this bull market being over just yet. Look back at the 1990s. It’s the best modern comparison to today’s market. After a wild, multiyear run, in 1998, it looked as though the wheels were coming off the dot-com boom. A financial crisis in East Asia spread to Russia and the rest of the emerging world. This culminated in the failure of the world’s most revered hedge fund, Long-Term Capital Management (LTCM)… a fund whose managers literally wrote the finance textbooks I read at the London School of Economics back in the day. LTCM’s failure nearly brought down every major Wall Street bank. The meltdown that happened in 2008 was a hair’s breadth away from happening in 1998. Only a shady backroom deal that Alan Greenspan’s Federal Reserve orchestrated stopped it. Things got nasty… In just 32 trading days, between July 17, 1998, and to August 31, 1998, the S&P 500 plunged about 20%. Then, in the blink of an eye, it rebounded. And it blasted higher by another 68% before finally topping out in the spring of 2000. The move in the tech-heavy Nasdaq was even more extreme, blasting higher by 236%. Could that happen again? Absolutely. But we could also be in the early stages of a recession that sees the market tumble a lot further from here. So, which is it? It’s hard for us mere mortals to say. But I’ll be watching closely this evening when my computer whizz colleague Keith Kaplan lifts the lid of his new master algorithm in his research demo. It’s a new kind of trading algorithm that can identify stock market melt-ups… and meltdowns. Introducing “Project MQ” If you don’t know Keith already, he’s the CEO of TradeSmith. It’s a software platform that provides data-driven tools and analytics to help everyday investors make better decisions. More than 60,000 individuals use its algorithms to track some $30 billion in assets. And these algorithms are hugely powerful… For instance, they would have signaled the start of every bull market going back nearly 100 years. And they’ve sent “exit” signals on 1,265 triple-digit winners over the past 24 months alone. But by Keith’s own admission, they’ve proven useless when it comes to identifying the kind of market melt-up and meltdown we saw in the 1990s with the internet boom. So, Keith called an emergency meeting with his data scientist, Michael Carr. Their goal was to determine if we were heading into a true market melt-up in 2025… and to show TradeSmith subscribers what they could do about it. The result? Their new MQ (Melt-Up Quotient) Algorithm. I won’t get into the details here. Keith will be doing that at 8 p.m. ET tonight during his research demo. But in broad strokes, the MQ Algorithm does three things… -
Distinguishes a melt-up from a bull market — using advanced mathematics, not theory or opinion -
Helps determine if we’re in a melt-up now, in 2025 -
Gives us a sense for how much longer this melt-up might last Oh, and Keith will also demonstrate how to use this new algorithm to determine if Nvidia is still a “buy” – or whether it’s time to dump this AI darling. But hurry. Time is running out. A quick click here will get you in instantly. This event is going to shed light on some of the most vexing questions facing us as investors today. I’m not going to miss it. See you there. To life, liberty, and the pursuit of wealth, | 
No comments:
Post a Comment